The federal student loan system is in crisis, and advocates for borrowers are warning that the situation will likely get worse after President Trump’s actions this week.
The federal student loan system is in crisis, and advocates for borrowers are warning that the situation will likely get even worse for those in repayment and for borrowers pursuing student loan forgiveness, following President Donald Trump’s executive order on Thursday calling for the U.S. Department of Education to be eliminated. The order also suggested that the federal student loan system should be privatized.
Millions of borrowers, particularly those in income-driven repayment plans or who are pursuing student loan forgiveness, are currently facing major challenges. The SAVE plan, a Biden-era repayment program that lowered payments for many, remains frozen as a legal challenge continues, and more than eight million borrowers who had enrolled in the program remain in a forbearance. Earlier this month, the Trump administration effectively shut down the entire income-driven repayment application system, causing a myriad of issues including skyrocketing payments and effectively blocking borrowers from accessing legally required affordable repayment plans, as well as Public Service Loan Forgiveness. A major labor union filed a legal challenge against the administration earlier this week to force the reopening of income-driven repayment applications and PSLF.
But borrower advocates are warning that President Trump’s latest move to try to shut down the Department of Education – which comes on the heels of mass layoffs at the department earlier in March – is only going to worsen the situation for borrowers, jeopardizing their access to affordable payment plans and congressionally authorized student loan forgiveness programs. Trump also suggested in the order that the federal student loan system should be effectively privatized. Here’s what borrowers need to know.Can Trump Privatize Federal Student Loan Forgiveness And Repayment Programs?
President Trump’s executive order on Thursday calls for the closure of the Department of Education. But most legal experts agree that the president has no legal authority to do so. The department was created by Congress, and can only be eliminated by Congress (where there are likely insufficient votes in favor of such a move). The executive order appears to concede this.
“The Secretary of Education shall, to the maximum extent appropriate and permitted by law, take all necessary steps to facilitate the closure of the Department of Education and return authority over education to the States and local communities while ensuring the effective and uninterrupted delivery of services, programs, and benefits on which Americans rely,” reads the order. The phrase “to the maximum extend appropriate and permitted by law” may be a tacit acknowledgment that only Congress has the ability to close the department.
